Scania interim report - january- march 2001

Thu, Apr 26, 2001 10:38 CET

SCANIA INTERIM REPORT - JANUARY- MARCH 2001
"Operating income for Scania products was SEK 943 m., a decrease of 10
percent. The slowdown in western European demand that I predicted
earlier has intensified. Scania has initiated a cost adjustment in its
European operations and the efficiency-raising programme in Latin
America is continuing," says Leif Östling, President and CEO.
FIRST QUARTER IN BRIEF
Q1 Q1 Q1
Units 2001 2001 2000 %
USD
m.*
Trucks and buses
- Order bookings 12,577 14,214 -12
- Deliveries 11,727 13,006 -10
Sales and earnings1
SEK m. unless
otherwise stated
Sales 1,194 12,405 12,050 3
Operating income 92 952 1,105 -14
Operating margin,
Scania Group, percent 7.7 9.2
Operating margin,
Scania products, percent 8.5 10.1
Income after financial 79 819 955 -14
items
Net income 55 573 661 -13
Return on equity, percent 20.2 23.4
Return on capital employed, 18.6 20.1
percent
Earning per share, SEK 0.28 2.87 3.31
Cash flows before 55 571 481
acquisitions
Number of shares: 200 million
Unless otherwise stated, all comparisons in brackets refer to the same
period of last year.
This report is also available at www.scania.com
*Translated solely for the convenience of the reader at a closing
exchange rate of SEK 10.3875= USD 1.00.
1Beginning with the first quarter of 2001, the Scania Group is
applying the new recommendation RR 11 of the Swedish Financial
Accounting Standards Council on revenue recognition. See page 6.
SCANIA, FIRST QUARTER OF 2001 - COMMENTS BY THE PRESIDENT AND CEO
"The Scania Group's operating income for the first quarter of 2001 was
SEK 952 m. Operating income for Scania products - excluding passenger
car operations - was SEK 943 m., a decrease of 10 percent compared to
the same period of 2000. Currency rate effects, inclusive of hedging
activities, had a positive effect of around SEK 150 m. in European
operations. Truck deliveries decreased by 17 percent in western Europe,
while sales of service-related products increased by 18 percent. Volume
growth continued in customer finance operations. Passenger car
operations, mainly in the form of Volkswagen products, showed weak
operating income of SEK 9 m., or SEK 47 m. worse than the corresponding
quarter of last year," Mr Östling notes.
"The slowdown in western European demand that I predicted earlier has
recently intensified even more. In the past month, macroeconomic
forecasts for western Europe have been revised downward substantially,
and uncertainty has increased significantly concerning growth during the
second half of this year. Transport volume is directly related to
economic developments. This means that, generally speaking, activity in
the transport industry has entered a calmer phase.
"The rapid growth of recent years in the western European heavy truck
market ended during the second half of 2000. Throughout this expansive
period, Scania was able to maintain constant delivery times, around
three months, thanks to the flexibility we have built into our
production system. As a result, the decrease in order bookings affected
us quickly, since the orderbook has been short. The pace of deliveries
has therefore fallen. In various markets this has led to a decrease in
our market share. Scania's market share fell to 14.5 percent in western
Europe. Several of our competitors have had longer orderbooks, which are
now being delivered. Smaller haulage firms, traditionally Scania's
largest customer category, are quickly affected by a transport market
slowdown and then postpone their capital spending. In contrast, larger
transport companies see opportunities to make purchases on favourable
terms in a depressed new-truck market. We have abstained from some of
these transactions, since we felt that the price levels could not be
justified.
"In central and eastern Europe, order bookings rose by 32 percent and in
Asia by 31 percent.
"As early as October last year, we made a decision to begin adjusting
the staffing in our European production organisation to a clearly lower
demand level. By year-end 2001, the number of production employees will
be about 1,200 lower. We are accomplishing this mainly by not renewing
time-limited employment contracts. We have also begun a review of the
number of employees in other staff categories, in order to adjust
staffing levels there as well. These measures will yield a gradual
effect during the year.
"During January, the shareholders of Beers accepted the offer that
Scania had made for the remaining 50 percent of the shares in Beers NV,
which has been our distributor in the Netherlands for more than 50
years. Now that Beers is wholly owned by Scania, we will begin a
restructuring of our Continental European sales and service organisation
in order to make it more efficient and provide even better service to
our customers.
"The trend of earnings in Latin America during the first quarter is a
disappointment. The need to continue streamlining of operations is
clear, above all by further nationalising a portion of component
purchases. A number of external factors have also affected the trend of
earnings. The political crisis in Argentina has had economic
repercussions in Brazil as well, where the currency depreciated by more
than 10 percent during the first quarter. As a result, the price level
in Brazil, measured in US dollars, is clearly too low. We are therefore
now gradually adjusting our prices upward. Early this year, Scania
acquired portions of the Battistella Group, its largest distributor
chain in Brazil.
"Order bookings in bus and coach operations were largely unchanged. A
cost adjustment programme is also underway in bus and coach operations.
It covers both products and production systems, and the aim is to
achieve the same operating margin for buses as for trucks.
"Industrial and marine engine operations developed favourably.
"The 16-litre V8 engine introduced last year is now in full production
and the feedback from our customers is very positive. During January we
introduced a 470 horsepower turbocompound version of our six-cylinder 12-
litre engine. We will gradually be able to produce it in larger
quantities during the year. With these engines, we have greatly
strengthened our competitiveness in our upper segment, the most
prestigious and profitable.
Passenger car operations showed a clear decline in operating income. The
main reason for this was sharply lower car sales in Sweden. The market
is expected to decrease by 10 to 15 percent compared to last year.
"It was not possible to fully offset the effects of shrinking demand for
heavy trucks in western Europe with volume increases in other markets,
higher local-currency revenue per vehicle sold and a weaker Swedish
krona. Scania has initiated a cost adjustment in its European operations
and the efficiency-raising programme in Latin America is continuing.
However, we expect lower earnings this year compared to last year." Mr
Östling concludes.
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About Us

Scania is a world-leading provider of transport solutions. Together with our partners and customers we are driving the shift towards a sustainable transport system. In 2017, we delivered 82,500 trucks, 8,300 buses as well as 8,500 industrial and marine engines to our customers. Net sales totalled nearly SEK 120 billion, of which about 20 percent were services-related. Founded in 1891, Scania now operates in more than 100 countries and employs some 49,300 people. Research and development are concentrated in Sweden, with branches in Brazil and India. Production takes place in Europe, Latin America and Asia, with regional production centres in Africa, Asia and Eurasia. Scania is part of TRATON AG. For more information visit: www.scania.com.